Vietnam CIT Incentives – Law 67/2025 & Decree 320 – IZ Removal & FDI Tax Planning

Vietnam eliminates industrial zone CIT incentives from 1 October 2025 under Law 67/2025/QH15. Eligible projects can achieve 10% CIT rates (versus the standard 20%) with up to 4-year full exemption and 9-year 50% reduction—delivering potential savings of 50-75% over 15 years. However, Decree 320/2025/ND-CP eliminates location-based incentives for industrial zones, forcing foreign investors to pivot toward sector-based qualification or disadvantaged-area strategies. Projects approved before October 2025 may grandfather existing incentives, while post-October investments face stricter criteria tied to encouraged sectors including high-tech, green technology, and digital transformation. 

Executive Key Takeaways

• Financial Impact: Eligible projects can achieve 10% CIT (vs. standard 20%) with 4-year full exemption + 9-year 50% reduction—potential savings of 50-75% over 15 years
• Legal Compliance: Law 67/2025/QH15, effective 1 October 2025, fundamentally changes incentive eligibility; Decree 320/2025 removes location-based perks for industrial zones
• Timeline: Projects approved before 1 October 2025 may grandfather existing incentives; post-October projects face stricter qualification criteria
• Strategic Risk: Industrial zone investors lose automatic location incentives—must pivot to sector-based or disadvantaged-area strategies
• Action Required: Verify project eligibility NOW; expansion projects may inherit incentives, while new IZ projects will not.

Quick Comparison: Pre-2025 vs. Post-2025 Incentives

CIT Incentive Structures: Rates, Holidays & Qualification Criteria

Vietnam offers three primary CIT incentive mechanisms: preferential tax rates ranging from 10-17%, tax exemption and reduction periods, and qualification pathways through either location or sector criteria. Understanding which structure applies to your project determines total tax liability over the investment lifecycle.

Preferential CIT Rates (10%-17%)

Preferential CIT rates reduce the standard 20% corporate income tax to lower tiers based on project characteristics. The 10% rate applies to projects in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones for a duration of 15 years from the first revenue-generating year, as specified under Law No. 67/2025/QH15. The 17% rate now serves a dual purpose: it applies to SMEs with annual revenue between VND 3-50 billion and acts as an intermediate tier for specific encouraged sectors not meeting the highest priority threshold.

Qualification requires meeting both location and sector conditions simultaneously. A manufacturing project in a High-Tech Zone qualifies for the 10% rate. The same project in a standard industrial zone would face the 20% standard rate under post-2025 rules. Tax authorities require annual verification through tax filings under Law 67/2025/QH15, as changes in business activities or revenue composition can trigger disqualification. For foreign investors managing multiple entities, Related Party Transactions under Decree 20/2025/ND-CP (amending Decree 132) is critical—it revises interest expense deductibility caps and related party definitions, directly impacting your consolidated CIT taxable income.

Tax Exemption & Reduction Periods

The standard incentive package provides 2-year full CIT exemption followed by 4-year 50% reduction of the applicable preferential rate, commonly referenced as “2 miễn 4 giảm” (2-year exemption, 4-year reduction), as specified in Law No. 67/2025/QH15. Enhanced incentives for priority zones extend this to 4-year exemption plus 9-year 50% reduction (“4 miễn 9 giảm”), as specified in Law No. 67/2025/QH15.

The exemption period begins in the first profitable year, defined as the first year the enterprise generates taxable income. If the enterprise does not achieve profitability within three years of generating revenue, the exemption period automatically starts in the fourth year. “This “4th year rule” under Law 67/2025/QH15 Article 14.4, prevents indefinite deferral. In practice, tax authorities scrutinize profit timing closely, and enterprises must maintain documentation proving genuine operational losses during pre-profitable years to avoid penalties for artificial profit deferral. Proper accounting services vietnam implementation ensures that financial reporting under Vietnam Accounting Standards accurately reflects profit recognition for tax authority review.

Location-Based vs. Sector-Based Incentives

Two qualification pathways exist: location-based incentives for projects in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones, and sector-based incentives for encouraged industries including high-tech manufacturing, green technology, digital transformation, and supporting industries. Projects may qualify through either pathway under Law 67/2025/QH15, but combining both does not create additional benefits beyond the maximum 10% rate and 4-year exemption plus 9-year reduction package.

Law 67/2025 & Decree 320/2025: The New FDI Tax Playbook

Law on Corporate Income Tax No. 67/2025/QH15 effective 1 October 2025 replaces the previous CIT framework and introduces stricter eligibility criteria that eliminate automatic incentives for industrial zone locations. This legislative shift requires immediate strategic review for all FDI projects in planning or expansion phases.

Law 67/2025/QH15: Effective 1 October 2025

The new law fundamentally restructures incentive eligibility by removing industrial zones from the list of qualifying locations for preferential CIT treatment. Projects approved and commencing operations before 1 October 2025 may continue under existing incentive approvals through grandfathering provisions. Projects approved after this date must qualify through encouraged sector criteria or investment in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones.

Key changes include tighter definitions of “encouraged sectors” with specific technology transfer and local content requirements, stricter revenue threshold monitoring to prevent incentive abuse through artificial business splitting, and enhanced documentation requirements for annual incentive compliance verification. 

Law 67/2025/QH15 introduces tighter definitions of ‘encouraged sectors’ with specific technology transfer and local content requirements, stricter revenue threshold monitoring, and enhanced documentation requirements for annual incentive compliance verification. These reporting obligations require precise data segregation—a capability now mandated under the new Circular 99/2025 Vietnam accounting regulations, which replace Circular 200 to ensure financial transparency for tax authorities.

Decree 320/2025: Industrial Zone Incentive Removal

Decree 320/2025/ND-CP (effective December 15, 2025, implementing Law 67/2025/QH15) eliminates incentives based solely on Industrial Zone status. However, projects in IZs located within designated disadvantaged areas may still qualify under the ‘difficult area’ criteria—check your zone’s classification immediately. 

This affects thousands of existing and planned FDI projects that selected industrial zone locations specifically for tax benefits. The decree provides no transition period for new projects—any investment approved after 1 October 2025 in an industrial zone receives standard 20% CIT treatment unless the project independently qualifies through sector-based criteria.

To assess your project’s new status:

• First, verify your Investment Registration Certificate approval date—pre-October approvals may retain incentives.
• Second, review your business sector classification against the encouraged sectors list in Article 12 of Law No. 67/2025/QH15.
• Third, calculate whether relocation to a Special Economic Zone or disadvantaged area would generate sufficient tax savings to justify relocation costs.
• Fourth, evaluate expansion project treatment—existing facilities may extend incentives to expansions if the expansion maintains the same business line and meets capacity and capital thresholds specified in Law 67/2025/QH15 and Decree 320/2025/ND-CP, as confirmed by the provincial Department of Planning and Investment. 

For multinational enterprises with operations in Vietnam, Vietnam’s global minimum tax obligations under Decree 236/2025/ND-CP may interact with CIT incentive calculations, particularly when incentive rates fall below the 15% Pillar Two threshold. 

The decision matrix for industrial zone investors: Stay in the industrial zone if your sector qualifies for incentives regardless of location (high-tech manufacturing, renewable energy, digital infrastructure). Relocate to a Special Economic Zone or High-Tech Zone if location-based incentives are critical and relocation costs are recoverable within 5-7 years through tax savings. Accept standard 20% CIT if neither sector qualification nor relocation is feasible, and optimize through other mechanisms such as transfer pricing or regional headquarters structures.

Expansion Projects: Inheriting vs. Losing Incentives

Expansion projects may inherit existing CIT incentives if the expansion maintains the same business sector, occurs within the same legal entity, and meets conditions such as a minimum 20% increase in fixed assets or production capacity relative to pre-expansion levels, as specified in Law No. 67/2025/QH15. Expansions exceeding this threshold or involving new business lines are treated as separate projects subject to post-2025 qualification rules.

Exceptions apply for expansions mandated by government industrial policy, such as local content requirements or technology upgrade directives. Special cases include expansions in Special Economic Zones where the original project predates the zone’s establishment—these may qualify for enhanced incentives even if the expansion occurs post-2025. 

The compliance checklist for expansion project qualification includes: original Investment Registration Certificate with incentive approval, business registration showing continuous operation in the same sector, audited financial statements proving the expansion does not exceed capital thresholds, and written confirmation from the provincial Department of Planning and Investment that the expansion qualifies for incentive inheritance. 

For enterprises with foreign contractor involvement in expansion activities, foreign contractor tax Vietnam withholding obligations must be segregated from CIT incentive calculations to prevent revenue threshold contamination.

Compliance Risks & Common Violations

CIT incentives are revoked retroactively when enterprises fail to maintain qualification conditions, triggering back-tax assessments, interest charges, and administrative penalties. Understanding common disqualification triggers prevents costly compliance failures.

Common Disqualification Triggers

Tax authorities audit incentivized projects for three primary violations: revenue threshold failures (where non-incentivized revenue exceeds 30% of total revenue, as specified in Law 67/2025/QH15), sector deviation, and location changes, including relocation of production facilities outside the approved incentive zone. 

Exceptions exist for force majeure events, including natural disasters, government-mandated relocations, or pandemic-related business interruptions, provided the enterprise notifies tax authorities within 30 days and receives written approval for temporary non-compliance. 

Government-approved modifications to the Investment Registration Certificate that change business scope may preserve incentives if the new scope also qualifies, but this requires proactive application rather than automatic continuation. 

Enterprises managing VAT refund for investment projects in Vietnam must ensure that VAT refund claims do not distort the revenue composition used for CIT incentive threshold calculations.

Penalty Framework

Penalties for CIT incentive violations include back-taxes calculated at the difference between the preferential rate paid and the standard 20% rate for all disqualified years, interest charges on unpaid CIT amounts, and administrative fines for late payment or non-declaration, as governed by Law No. 67/2025/QH15 and related regulations. Interest accumulates from the original tax payment deadline of each disqualified year, creating substantial liability for violations discovered years after occurrence.

If-then scenarios:

• If revenue threshold violation occurs in Year 3 of a 4-year exemption period, then the enterprise owes back-taxes for Years 1-3 plus interest from each year’s filing deadline.
• If sector deviation is discovered during a tax audit, then incentives are revoked from the first year of deviation, not the audit year.
• If location change occurs without Investment Registration Certificate amendment, then all incentives are disqualified from the project’s inception, regardless of prior compliance.

Reality Check: Law vs. Practice

Law on Corporate Income Tax No. 67/2025/QH15 states that projects meeting published criteria automatically qualify for incentives. However, in practice, tax authorities require proactive annual documentation, including letters confirming sector classification from the Ministry of Planning and Investment, quarterly revenue reports segregating incentivized and non-incentivized income, and site inspection reports confirming production occurs in the approved location. 

The key risk is assuming automatic continuation—enterprises must file incentive eligibility confirmation annually as part of the CIT finalization process, and failure to submit supporting documentation results in incentive denial even when substantive qualification exists.

The compliance checklist for annual review includes: Investment Registration Certificate remains valid and unmodified, business registration reflects current activities matching the certificate, audited financial statements show revenue composition within thresholds, production facilities operate in the approved incentive location, and all quarterly CIT prepayments applied the correct preferential rate. Chief accountant roles in these companies include oversight of this annual compliance documentation, with statutory accounting requirements mandating quarterly review cycles.

Conclusion & Strategic Next Steps

Vietnam’s CIT incentive framework delivers substantial tax savings for qualifying projects, but the October 2025 legal transition creates urgent strategic decisions for foreign investors. The elimination of industrial zone location-based incentives under Decree 320/2025/ND-CP forces a fundamental pivot toward sector-based qualification or investment in disadvantaged areas and Special Economic Zones. Projects approved before 1 October 2025 retain grandfathering protection, making immediate eligibility verification critical for preserving existing incentive structures.

The three strategic imperatives: First, audit current projects against Law on Corporate Income Tax No. 67/2025/QH15 criteria to confirm grandfathering eligibility and identify compliance gaps. Second, evaluate expansion plans under the new framework—determine whether sector-based qualification is achievable or whether relocation to qualifying zones justifies the investment. Third, implement quarterly compliance monitoring rather than annual reviews to prevent multi-year disqualification from revenue threshold or sector deviation violations.

Indochina Link Vietnam provides CIT incentive eligibility assessment, pre-October 2025 compliance review, and strategic restructuring for FDI projects. Contact our tax advisory team for a confidential project evaluation and grandfathering verification before the 1 October 2025 deadline.